Kerry slams Bank on BCCI

Senator John Kerry has slated the Bank of England over its handling of the BCCI banking disaster and warned that the City remains vulnerable to another major scandal.

The defeated presidential candidate's words will boost BCCI's creditors, who are suing the Bank of England for allegedly turning a blind eye to fraud at BCCI. Kerry expressed solidarity with the creditors yesterday and told The Observer: 'The Bank of England failed to supervise BCCI properly.'

Kerry is an acknowledged expert on the long-running BCCI affair, having led a US Senate investigation into the rogue bank more than 10 years ago. BCCI, headquar tered in London, collapsed in 1991 with undeclared debts of £7 billion.

Kerry also said yesterday that banking supervision had improved since BCCI but warned it was 'still necessary' for regulators on both sides of the Atlantic to tighten their anti-money laundering procedures. 'Financial transparency is more important than ever, and we're going to need to continue to be vigilant to prevent any would-be rogue bank from creating another round of victims,' he said.

Following BCCI's crash, the Bank of England was criticised by Kerry and others for failing to protect investors and depositors. It was later stripped of its regulatory functions, which were passed on to the newly-created Financial Services Authority.

BCCI's victims are currently suing the Bank of England for up to £1bn compensation, alleging that Thread- needle Street officials acted with wilful negligence amounting to 'misfeasance in public office'.

The high-profile case at the High Court in London is expected to run for at least another year.

The Bank of England denies the allegation and is fiercely resisting the claim, which threatens to remove the statutory immunity that government departments have against being sued. A Bank spokesman declined to comment on Kerry's remarks, but added: 'Public officials in America enjoy the same immunity'.

Christopher Grierson of Lovells, the law firm representing BCCI's creditors, said: 'We are very pleased to hear that Senator Kerry supports our action.'